annual general meeting fy2019 - singapore exchange...2019/10/30 · global chip sales declined...
TRANSCRIPT
Annual General Meeting FY2019 30 October 2019
Micro-Mechanics AGM2019 Presentation 2
perfect parts and tools, on time, every time
Agenda
2.00 pm – 2.15 pm Presentation
2.15 pm – 2.30 pm Q&A
2.30 pm – 3.30 pm AGM Proceedings
Micro-Mechanics AGM2019 Presentation 3
perfect parts and tools, on time, every time
Business & Industry
Chris Borch, CEO
Low Ming Wah, COO
Micro-Mechanics AGM2019 Presentation 4
• Founded in 1983 in Singapore
• Design and manufacture high precision tools and parts used
in process-critical applications for the wafer-fabrication and
assembly processes of the semiconductor industry
• Serve a worldwide base of customers from five facilities in Asia
(Singapore, Malaysia, China, Philippines) and the USA
• More than 600 active customers
• Listed on the Singapore Exchange (Main Board) since 2003
• Committed to generating shareholder returns
Our Mission is…
Based on Scalable, Repeatable and Cost-
Effective Processes
Perfect Parts and Tools On
Time, Every Time
Corporate Overview
Micro-Mechanics AGM2019 Presentation 5
Business Model
HIGH PRECISION, PROCESS-CRITICAL Parts and Tools for Semiconductor Industry
Proprietary consumable tools used in
the assembly and testing of
semiconductors, such as die-attach
and wirebonding tools
Contract manufacturing of precision
parts used in process-critical
applications for the wafer fabrication
industry
IDMs, Semiconductor assembly
and test service providers
Leading wafer fabrication
equipment manufacturers
HIGH PRECISION AND QUALITY | SHORT CYCLE TIME |
| WORLDWIDE SUPPORT | VALUE > COST CUSTOMER
VALUE
PRODUCTS
CUSTOMERS
Micro-Mechanics AGM2019 Presentation 6
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Jan
-15
Ap
r-15
Jul-
15
Oct
-15
Jan
-16
Ap
r-16
Jul-
16
Oct
-16
Jan
-17
Ap
r-17
Jul-
17
Oct
-17
Jan
-18
Ap
r-18
Jul-
18
Oct
-18
Jan
-19
Ap
r-19
Jul-
19
Semiconductor Industry Review
(US$ B) YOY Growth
Sources: Semiconductor Industry Association, World Semiconductor Trade Statistics
Global chip sales declined 14.6% during
the first eight months of 2019
WSTS Semiconductor Sales Forecast
WSTS projects sales to decline 13.3% in 2019
Global Monthly Chip Sales
(US$ B)
300.0
320.0
340.0
360.0
380.0
400.0
420.0
440.0
460.0
480.0
500.0
2017 2018 2019F 2020F
-13.3%
13.7%
4.8%
Micro-Mechanics AGM2019 Presentation 7
-40%
-20%
0%
20%
40%
60%
80%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan
-17
Feb
-17
Mar-
17
Ap
r-17
May-1
7Ju
n-1
7Ju
l-17
Au
g-1
7Sep
-17
Oct
-17
No
v-1
7D
ec-
17
Jan
-18
Feb
-18
Mar-
18
Ap
r-18
May-1
8Ju
n-1
8Ju
l-18
Au
g-1
8Sep
-18
Oct
-18
No
v-1
8D
ec-
18
Jan
-19
Feb
-19
Mar-
19
Ap
r-19
May-1
9Ju
n-1
9Ju
l-19
Au
g-1
9
YOY
Growth
Semiconductor Industry Review
(US$ B)
Source: SEMI
• Global sales of semiconductor manufacturing equipment by original
equipment manufacturers projected to drop 18.4% to $52.7 billion in
2019 from last year’s historic high of $64.5 billion
Three-month average of worldwide billings of
North American equipment manufacturers SEMI 2019 Mid-Year Total Equipment Forecast
Micro-Mechanics AGM2019 Presentation 8
Cyclically Slower Market Conditions
Semiconductor market
declines from historical high
Capex to enhance core
competencies
• Global chip and semiconductor equipment sales
declined from a record high in 2018 due to cyclically
slower market conditions and heightened economic
uncertainties
• Reflecting the industry conditions, Group revenue
moderated in FY2019 from a record level in FY2018
• Coupled with higher depreciation expenses arising from
our ongoing investments to enhance core
competencies, Group net profit decreased in FY2019
• However, gross profit margin remained above our
target of 50%
• Dividend also maintained at 10 cents per share. This
projects our confidence in the Group’s and
semiconductor market’s long-term prospects
Micro-Mechanics AGM2019 Presentation 9
Prepared for Industry Recovery
• Despite its cyclical nature, the
semiconductor industry is poised for a
prolonged period of solid growth
Materials
-Continue to work on developing proprietary
materials for our consumable tools
Processes -Working to develop flawless processes
-Set-up time reduction, higher automation and
smart-factory initiatives
-Enhance efficiency of operations
Products -Focus on process-critical tools and parts that
offer opportunities for attractive profit margins
People
-Maintain and strengthen our team of skilled
and capable people : 490 as at 30 June 2019
Financial -Healthy balance sheet and zero debt
• Chip fabrication is becoming increasingly difficult as
the industry transits to 10-nanometer and below
geometries
• Continue to focus on initiatives and investments that
bring value to our customers
• Only a handful of suppliers will possess the unique
capabilities, skilled personnel and IP to meet the
critical manufacturing requirements of the
semiconductor industry
• Micro-Mechanics is well-positioned for a
recovery in the semiconductor industry
Micro-Mechanics AGM2019 Presentation 10
Commitment to Governance
Singapore Governance and Transparency Index 2019
75
80
85
90
95
100
105
2015 2016 2017 2018 2019
Our SGTI Score
Micro-Mechanics ranked among the Top 20 companies
Singapore Corporate Awards Best Managed Board Award – 2012, 2015, 2016 and 2017
Best Investor Relations Award – 2010 to 2015 and 2017
Since listing in 2003, Micro-Mechanics has received 31
awards in recognition of our high standards of corporate
governance, quality of disclosure, transparency and
investor relations
SIAS Investors Choice Awards Shareholder Communications Excellence Award – 2018 and 2019
Singapore Corporate Governance Award – 2016 to 2019
Most Transparent Company Award – 2005, 2008 to 2016
Corporate Governance Award (Sesdaq) - 2006
Asiamoney Corporate Governance Poll Best for Shareholders’ Rights & Equitable Treatment in Singapore
– 2009 and 2010
Singapore Corporate Awards Best Chief Executive Officer Award - 2018
Chief Financial Officer of the Year - 2008
Our management has also been recognised for their
business leadership
Micro-Mechanics AGM2019 Presentation 11
Chow Kam Wing, CFO
Financial Review
perfect parts and tools, on time, every time
Micro-Mechanics AGM2019 Presentation 12
60.3
32.4
0
17.1 12.9
27.9
0.6
15.9
4.1
FY2019 P&L Overview (S$ million)
KEY RATIOS & STATISTICS
REVENUE GROWTH (7.3%)
GROSS PROFIT GROWTH (12.7%)
PBT GROWTH (21.9%)
NET PROFIT GROWTH (24.5%)
GROSS PROFIT MARGIN 53.7%
NET PROFIT MARGIN 21.5%
EARNINGS PER SHARE 9.31 cents
DIVIDEND PAYOUT 107%
RETURN ON EQUITY 22.2%
CASH S$21.9M
DEBT Zero
FY2019 in Review
N.B. Due to rounding, some totals may not correspond with the sum/subtraction of
separate figures. FY: Financial year ending 30 June
Micro-Mechanics AGM2019 Presentation 13
Dividend Policy of Not Less Than 40% of Earnings*
Total dividend payout since listing – 73.9 CENTS per share
*subject to Board approval and expected capital requirements
Dividend Performance
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019
29% 35% 61% 63% 83% 78% 513% 87% 61% 99% 81% 54% 58% 70% 75% 81% 107%
DIVIDEND PAYOUT RATIO
0.8 1.2
2.4 3.5
5.0 5.0
2.0 3.0 3.0 3.0 3.0 3.0
5.0 6.0
8.0
10.0 10.0
Special dividend
Final dividend
Interim dividend
DIVIDEND PER SHARE (CENTS)
MAINTAINED TOTAL DIVIDEND OF 10 CENTS PER SHARE FOR FY2019
Micro-Mechanics AGM2019 Presentation 14
Group Revenue
N.B. Due to rounding, some totals may not correspond with the sum of separate figures.
SLOWER MARKET CONDITIONS IN SEMICONDUCTOR INDUSTRY
FY2019 REVENUE 7.3% • 1Q20 marked the first quarter-on-quarter
increase since 1Q19
1Q20 REVENUE 9.1%
Group Revenue
(S$ mil)
16.9 15.2 14.4 13.9
15.3
1Q19 2Q19 3Q19 4Q19 1Q20
13.0 13.6 13.4 17.7 16.9 15.3
12.9 12.2 14.2
15.6 15.2
13.4 12.5 14.2
16.1 14.4
12.9 13.0
15.4
15.7 13.9
52.2 51.3
57.2
65.1 60.3
0
10
20
30
40
50
60
70
80
FY2015 FY2016 FY2017 FY2018 FY2019 1Q20
4Q
3Q
2Q
1Q
• Reflects cyclically slower market conditions in the
global semiconductor industry
10.1%
Micro-Mechanics AGM2019 Presentation 15
DIVERSIFIED REVENUE STREAMS
Group Revenue
Singapore, 6%
Malaysia, 17%
China, 30%
Thailand, 2%
Philippines,
11%
USA, 19%
Europe, 4%
Japan, 2%
Taiwan, 8% Rest of world,
1%
Sales Breakdown for 1Q20
Country FY2019 FY2018
% change S$ mil S$ mil
China 17.3 18.0 (2%)
USA 12.5 12.2 2%
Malaysia 11.2 12.1 (8%)
TOP 3 MARKETS
Singapore,
5%
Malaysia,
19%
China, 29%
Thailand, 2%
Philippines,
10%
USA, 21%
Europe, 4%
Japan, 2%
Taiwan, 7% Rest of world,
1%
Sales Breakdown for FY2019
Country 1Q20 1Q19
% change S$ mil S$ mil
China 4.7 5.5 (16%)
USA 3.0 3.0 (1%)
Malaysia 2.6 3.1 (16%)
Micro-Mechanics AGM2019 Presentation 16
55.0% 56.9% 57.4% 57.0%
53.7%
59.5%
52.4% 49.3%
52.4% 53.4%
FY2015 FY2016 FY2017 FY2018 FY2019 1Q19 2Q19 3Q19 4Q19 1Q20
Gross Margin Gross Profit Margin
GROSS PROFIT MARGIN REMAINED ABOVE 50%
• Increase in production headcount
• Depreciation expenses increased by S$0.6
million after a record capex in FY2018
• Reduced sales resulted in under-absorption
of fixed overheads
Micro-Mechanics AGM2019 Presentation 17
Profitability
N.B. Due to rounding, some totals may not correspond with the sum of separate figures.
MAINTAINED TIGHT REIN ON OPERATING EXPENSES
25.5%
26.2%
25.1%
23.4%
25.4%
24.6%
0% 5% 10% 15% 20% 25% 30%
FY2015
FY2016
FY2017
FY2018
FY2019
1Q20
Operating Expenses - Administrative, distribution and other
operating expenses (inclusive of other income)
Operating Expenses / Revenue
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019
18.8%
25.6% 23.7% 27.0% 28.4%
22.2%
Return on Equity
2.8 3.6 3.4 5.2 4.5 3.3
2.7 2.7 3.4
3.9 3.1
3.7 2.7 3.5
4.1
2.6 2.8 2.9
4.6
4.0
2.7 12.0 11.9
14.8 17.1
12.9
23.0% 23.2%
25.8% 26.3%
21.5% 21.3%
0%
5%
10%
15%
20%
25%
30%
0
5
10
15
20
25
FY2015 FY2016 FY2017 FY2018 FY2019 1Q20
4Q
3Q
2Q
1Q
Net Profit After Tax (S$ mil) Net Profit Margin
FY2019 PROFIT 24.5% 1Q20 PROFIT 27.4%
• Softer revenue and higher cost of sales arising from increased personnel,
depreciation charges
• However, 1Q20 net profit increased 20.9% from 4Q19, and also higher
than each of the last 3 quarters of FY2019
Micro-Mechanics AGM2019 Presentation 18
14.1
16.3
18.1
22.4
19.3
3.2
0
2
4
6
8
10
12
14
16
18
20
22
24
FY2015 FY2016 FY2017 FY2018 FY2019 1Q20
(S$ mil)
4.9 4.1
5.1
12.1
3.4
0.5 0
2
4
6
8
10
12
14
16
18
20
22
24
FY2015 FY2016 FY2017 FY2018 FY2019 1Q20
(S$ mil)
Track record of healthy net cash
from operating activities
CAPEX
Cash Flow
CASH-FLOW GENERATIVE OPERATIONS
FY2020
Capex budget
S$6M to S$7M
Micro-Mechanics AGM2019 Presentation 19
30 September 2019 30 June 2019
Cash Cash and cash equivalents#
S$24.3M S$21.9M
Gearing Total borrowings Nil Nil
Trade Receivables Trade Receivables
(Outstanding > 90days) / (Total
trade receivables)
Bad debt expense
S$10.3M
0.29%
Nil (1Q20)
S$9.5M
0.0%
Nil (FY19)
Inventory Inventory
Inventory / Sales
Inventory write-off
S$4.8M
7.8%
S$31k (1Q20)
S$4.5M
7.5%
S$104k (FY19)
Equity Shareholders’ equity#
NAV per share
S$61.9M
44.52 cents
S$58.4M
41.98 cents
# Paid final and special dividends totalling S$8.3M for FY2018 and interim dividend of S$5.6M for 1H19
Balance Sheet
Micro-Mechanics AGM2019 Presentation 20
This presentation contains certain statements that are not statements of historical fact, i.e. forward-looking statements. Investors can identify some of these statements by forward-looking items such as ‘expect’, ‘believe’, ‘plan’, ‘intend’, ‘estimate’, ‘anticipate’, ‘may’, ‘will’, ‘would’, and ‘could’ or similar words. However, you should note that these words are not the exclusive means of identifying forward-looking statements. These forward-looking statements are based on current expectations, projections and assumptions about future events. Although Micro-Mechanics (Holdings) Ltd. believes that these expectations, projections, and assumptions are reasonable, these forward-looking statements are subject to the risks (whether known or unknown), uncertainties and assumptions about Micro-Mechanics (Holdings) Ltd. and its business operations.
Some of the key factors that could cause such differences are, among others, the following:
• changes in the political, social and economic conditions and regulatory environment in the jurisdictions where we conduct business or expect to conduct business;
• the risk that we may be unable to realise our anticipated growth strategies and expected internal growth;
• changes in and new developments in technologies and trends;
• changes in currency exchange rates;
• changes in customer preferences and needs;
• changes in competitive conditions in the semiconductor industry and our ability to compete under these conditions;
• changes in pricing for our products; and
• changes in our future capital needs and the availability of financing and capital to fund these needs.
Given these risks, uncertainties and assumptions, the forward-looking events referred to in this presentation may not occur and actual results may differ materially from those expressly or impliedly anticipated in these forward-looking statements. Investors are advised not to place undue reliance on these forward-looking statements.
Investors should assume that the information in this presentation is accurate only as of the date it is issued. Micro-Mechanics (Holdings) Ltd.’s business, financial conditions, results of operations and prospects may have changed since that day. Micro-Mechanics (Holdings) Ltd. has no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Safe Harbour for Forward-Looking Statements
Micro-Mechanics (Holdings) Ltd.
31 Kaki Bukit Place
Eunos Techpark
Singapore 416209
www.micro-mechanics.com
Octant Consulting
Tel (65) 6296 3583
[email protected] / [email protected]
INVESTOR RELATIONS CONTACT